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Do Companies Exist? Part II

Quite a bit of feedback from last week’s post, where it has been suggested that companies (because they are made up of people) should not be seen as independent entities at all – especially for tax purposes. Many thanks to all those that took the trouble to comment on the post.

Of course, I do see companies as part of our “ecosystem” and quite independent from those people that constitute its parts – in the same way that people are quite distinct from the billions of cells that make us.

“a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.”

—A Treatise on the Law of Corporations, Stewart Kyd (1793-1794)

Since Stewart Kyd defined them in 1793, companies (including corporations) have existed as independent entities – on that we are all agreed.

However, many do see companies as simply a bunch of individuals – which is not correct – and this error is what dictates the desire to take away, for example, corporation taxes. Most companies act as independent entities – the decisions of the individuals involved have emergent qualities in most of them that develop a singular aspect as the company. This is clearly evident to its customers, its investors and the people (and other organisations) with which it does business. In such an environment, companies make decisions which are corporate decisions – propelled by the dynamic of the organisation rather than the individually distinct decisions of the individuals concerned.

This is at the heart of the issue over company taxation. Even if we could distinguish the impact of extra taxation on the wide range of individuals that would be hit by the additional taxation on them that would be required if there was no corporate tax, it would not be right to have companies on zero tax.The problem with this is that companies are clearly distinct entities and act as entities within an environment in which they are seen by their staff, investors, customers and others as distinct. Representatives from companies appear in conferences (as representatives, rarely as distinct individuals).

The impact of all corporate decision-making, strategy, impact on society, impact on resources is always at the organisational level and the legalistic distinction that taxing companies is difficult because they can move money around or they don’t really exist (it is really the individuals behind them) is a flawed argument and one that takes no account of the impact of companies on society and the way that society (people) see companies.

The issue for me is that it is the organisation that makes profits (sure, on behalf of investors and using staff and suppliers and satisfying customers – all people). The organisation “thinks” corporately and takes decisions corporately and lobbies corporately and impacts corporately. It makes perfect sense for that organisation to be assessed for taxation corporately. It is also SEEN to be corporate – like any emergent organising entity – just as we divide into nations, states or cities which, similarly, have different laws and taxes, moral codes and ways of living. It brands itself as independent; it advertises and markets itself as independent. Companies are born and die, evolve, grow and diminish. Such organisations are distinct in themselves – not just an amalgam of individuals.